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Nonparametric Filtering of the Realised Spot Volatility: A Kernel-based Approach

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  • Dennis Kristensen

    (School of Economics and Management, University of Aarhus, Denmark)

Abstract

A kernel weighted version of the standard realised integrated volatility es- timator is proposed. By different choices of the kernel and bandwidth, the measure allows us to focus on specific characteristics of the volatility process. In particular, as the bandwidth vanishes, an estimator of the realised spot volatility is obtained. We denote this the filtered spot volatility. We show con- sistency and asymptotic normality of the kernel smoothed realised volatility and the filtered spot volatility. The choice of bandwidth is discussed and data- driven selection methods proposed. A simulation study examines the finite sample properties of the estimators.

Suggested Citation

  • Dennis Kristensen, 2007. "Nonparametric Filtering of the Realised Spot Volatility: A Kernel-based Approach," CREATES Research Papers 2007-02, Department of Economics and Business Economics, Aarhus University.
    • Handle: RePEc:aah:create:2007-02
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    References listed on IDEAS

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    More about this item

    Keywords

    Diffusion; in-fill asymptotics; kernel estimation; nonparametric; spot volatility; realised volatility;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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